Automotive Sector: Domestic Content Exemption

A 6-Month Respite for the Automotive Sector: A New Era in Domestic Content Certificate Calculation

The automotive sector, one of the locomotive sectors of the Turkish economy, is facing a significant regulation. With the latest amendment to the Domestic Goods Communiqué, an exemption for a period of 6 months has been granted for the calculation of the domestic contribution rate for products in the automotive sector. This decision has resonated widely among sector representatives, while its potential effects on production processes and supply chains have also begun to be discussed.

The Domestic Goods Communiqué and the Exception in Automotive

The Domestic Goods Communiqué is a critical regulation that determines the procedures and principles required for products manufactured in Turkey to acquire "domestic goods" status. This communiqué stipulates criteria such as the use of a certain proportion of domestic input and the execution of production processes in Turkey for a product to be considered domestic. The domestic goods certificate is of great importance, especially in public procurements and some incentive mechanisms. However, with the latest amendment, a special exception has been made for the automotive sector. The sector will be temporarily exempted from the domestic contribution rate calculation for products for which it applies for a domestic goods certificate for six months. This exemption may aim to alleviate the pressure of external factors on the sector, such as disruptions in global supply chains and fluctuations in raw material prices.

What Does This Mean for the Sector?

The automotive sector holds strategic importance for the Turkish economy with its high value-added production, extensive employment opportunities, and export potential. Any regulation in this sector has the potential to directly affect thousands of suppliers and millions of employees. The exemption from the domestic contribution rate calculation can provide significant flexibility for companies that struggle to find domestic input, especially during new model productions or revisions of existing models. This situation may allow companies to plan their production more easily, be less affected by disruptions in the global supply chain, and perhaps gain a cost advantage. The temporary exemption can be considered a step taken to help the sector cope with current challenges and maintain its international competitiveness.

Global Dynamics and Local Solutions

In recent years, the global chip crisis, raw material supply problems, and increases in logistics costs worldwide have deeply affected the automotive sector. Manufacturers in Turkey have also been impacted by these global dynamics. This temporary change in the Domestic Goods Communiqué may aim to reduce the reflection of vulnerabilities in global supply chains on local production and support the sector's adaptation process. While such regulations ensure the continuity of production and the stability of the sector in the short term, they should not overlook the long-term goal of promoting local production and localization. At the end of the exemption period, how the sector utilizes this flexibility and the direction in which domestic supply capacity develops will be closely monitored.

Highlights

• The automotive sector has been exempted from the domestic contribution rate calculation under the Domestic Goods Communiqué for a period of 6 months.
• This exemption temporarily suspends the calculation of the domestic contribution rate for products in applications for a domestic goods certificate.
• The primary goal of the regulation is to provide flexibility to the automotive sector, which is experiencing global supply chain disruptions and raw material issues.
• The decision is expected to positively impact production planning and international competitiveness within the sector.
• At the end of the exemption period, the sector's situation and localization strategies will be re-evaluated.